S.E.C. Real Estate Observer

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Editor’s Note: This article first appeared in the April 1972 Real Estate News Observer

Many bro­kers recoil in horror when I remark I require my clients to bring in their last three to five years of Income Tax Reports.

“What?” they exclaim, “Why, that’s private, privileged information!”

“That’s right,” I agree. “Private, privi­leged information to be shared with his tax consultant, attorney, and … ME!”

Unless we raise our sights to the hori­zon of the intelligent, studious and analytical, we shall forever remain in the jungle of rushing hither and thither after the fast buck. A client who trusts you to sell or exchange his income property has the right to expect you to guide him toward the greatest area of benefits — and the least area of detriments.

How can anyone design an investment transaction without knowing the exact tax position of his client? Are we bettering his position or decreasing it?

If our goal is to benefit the client, how can we possibly know whether any transaction we propose is the right goal — except for how much commis­sion it will put in our pocket?

The requirement, of course, is securing his confidence and trust to the point he is not only willing to hand us the reports, but actually expects to do so before we require them. If our goal is to benefit ourselves, then he is going to be very reluctant to divulge this information because he feels we will use it to his disadvantage in selling him something he really would rather not undertake.

If we are professional in our approach to the solving of a problem, and in our handling of the client, there seldom is any objection to meeting any require­ment the counselor may have. During a recent counseling session with a client-applicant, he accused his broker of costing him $18,000.00 in income taxes he really didn’t have to pay.

Zeroing in on this point, I was able to develop the additional information that he had listed his property with a bro­ker who had received an offer from another broker, and the offer was accepted.

He admitted he had not given his broker his income tax reports, and that he had not consulted his CPA. He had closed the transaction because he was enjoying a large profit — about the amount of the tax because of depreciating the property for 27 years.

I asked him why he had not presented his income tax reports to his broker and he replied because it was none of the broker’s business — it was “privi­leged information.” I reminded him that the “privilege” had just cost him $18,000.00.

He left the office much wiser and more enlightened as to the modern role of the broker. What his broker had not known had injured him!

If we ever wish to pull ourselves up out of the jungle by our bootstraps, we must adopt professional practices and policies that will permit us to perform a professional job. There is no other way.

Mr. Chatham was a member of the Board of Governors and Regional Director of the Society of Exchange Counselors. He taught “Counseling and Client Management” for The Reno Founda­tion, which became a vibrant and acclaimed seminar.